India imports more than 85% of its crude oil requirements. Therefore, the prices of Petrol and Diesel in the country are linked to their respective prices in the international market. The retail prices of Petrol and Diesel depend on various factors viz. crude oil purchase price, exchange rate, shipping charges, inland freight, refinery margin, dealer commission, central taxes, state VAT and other cost elements.
While the average price of Indian basket of Crude oil increased by 102% (from $43.34 to $87.55) between November 2020 and November 2022, the retail prices of Petrol and Diesel have increased in India by only 18.95 % and 26.5 % during this period.
Prices of Petrol and Diesel have not been increased by public sector Oil Marketing Companies (OMCs) since 6th April 2022, despite record high international prices. As a result, against the combined ‘Profit Before Tax’ of Rs. 28360 Crore in H1 of financial year 2021-22, the three OMCs viz. IOCL, BPCL and HPCL have booked a combined loss of Rs. 27276 Crore in H1 of current financial year 2022-23.
To insulate the Indian consumers from the impact of high international crude oil prices, Central Government reduced the Central Excise duty twice on 21 November 2021 and 22 May 2022, effecting a cumulative reduction of Rs. 13 and Rs. 16 per litre for petrol and diesel respectively, which was fully passed on to consumers. Following these reductions in Central Excise duty, some of the States/UTs also reduced Value Added Tax (VAT) rates on Petrol and Diesel. The details of monthly average Retail Selling Prices (RSP) of Petrol and Diesel at Delhi since December 2020 are given at Annexure -I.
India imports more than 60% of its domestic LPG consumption. Prices of LPG in the country are based on Saudi Contract Price (CP), the benchmark for international prices of LPG. Saudi CP rose from 236 $/MT in April 2020 to 952 $/MT in April 2022 and continues to prevail at elevated levels currently. However, the Government continues to modulate the effective price to consumer for domestic LPG. Public Sector Oil Marketing Companies have suffered huge losses on sale of domestic LPG. To compensate these losses, the Government has recently approved a one-time compensation of Rs. 22000 crores to OMCs.